To purchase a home in Fairbanks or North Pole Alaska you should be prepared, at the time you are ready to make your offer, to write a check for earnest money. It is a deposit, a good faith gesture that shows that you are serious and it secures the contract. It is credited to you as the buyer at the end of the transaction and goes toward your closing costs or your down payment and it is also there as a potential forfeit to the seller if you decide to back out of the transaction for no good reason. The amount of your earnest money depends on how seriously you would like to be taken as a buyer but the typical “best” amount here is 2% of the purchase price.
When you sit down with your realtor to write the offer she will work with you to determine the amount of earnest money and she will most likely recommend 2%. If you are buying a home for $300,000, for instance, the listing representative that will be presenting your offer will be perfectly satisfied seeing a copy of a $6,000 check written out to the brokerage that your realtor works at. If you can not or do not wish to commit that much money to the offer you may run the risk of a seller not giving you as much consideration as you deserve. The seller is motivated to find a buyer that will give them the most money but they are also motivated to find a buyer that is committed to the process and will close the transaction. A high offer with very low earnest money may be a red flag to the seller and the seller’s realtor that a buyer will walk away quickly at the first sign of trouble. An offer that is a little lower with strong earnest money may project to the seller that the buyer is willing to commit a fair amount of money be put on deposit because the buyer will stick with the process.
There are some loan programs that allow the buyer to put very little money down to purchase. Popular in the Interior because of our military community are VA loans that actually allow 0 down payment. Because of that it is more typical to find a VA offer where a buyer has put less than 2% down. What I have found is that if a buyer is using a VA loan they will most likely put $1,000 in earnest money. Less than that really tells a seller that there is very little cash available from the buyer and they may become wary of accepting an offer. Make sure that you work with your realtor to tailor your earnest money to your loan program and your offer to guarantee that you are putting your strongest offer forward right off the bat.
The best realtors in Fairbanks Alaska are available and waiting at Empire Realty to answer your questions about earnest money and writing strong offers. Call our office at (907) 374-4663 today.